Revenue-sharing dispute sinks bill to boost offshore drilling safety

Legislation that would boost offshore drilling safety was thrown into limbo last week, after senators clashed over a plan to give coastal states a greater share of federal revenues for energy produced near their beaches.

The breakdown of a Senate Energy and Natural Resources Committee debate on the measure could put the entire drilling safety bill into jeopardy after more than a year of negotiations on the legislation inspired by the 2010 Gulf oil spill.

Panel chairman Jeff Bingaman, D-N.M., said he was unsure how to get the bill back on track.

Sen. Jeff Bingaman (AP photo)

“I don’t know how we proceed,” Bingaman confessed.

The committee’s business meeting was halted after senators sparred over the controversial revenue-sharing proposal. Apparently sensing defeat, many panel members who backed the revenue-sharing plan left the room — a move that ensured Bingaman did not have a quorum required under Senate rules to amend or vote on the legislation.

Championed by Sens. Mary Landrieu, D-La., and Lisa Murkowski, R-Alaska, the failed revenue proposal would expand an existing program that currently is limited to oil and gas production in federal waters near four Gulf Coast states.

Under their plan, Alaska and all other coastal states could collect 37.5 percent of the federal revenues for energy produced in nearby federal waters, whether it comes in the form of extracted oil and gas or harnessed wind and solar power. Half of the dollars would still go the federal government.

Opponents — including some panel Republicans — argued that the federal government cannot afford to lose out on potentially billions of dollars annually, given the nation’s rising debt.

The government collected $5 billion in offshore royalties last year.

Offshore drilling foes also have traditionally opposed revenue-sharing proposals in the past out of fear that cash-strapped states would be lured into supporting drilling near their coasts.

But supporters argued that coastal states deserve compensation for the burden of offshore energy development near their shores.

There are “day-to-day impacts that a community will see as a result of any development within your region,” noted Murkowski. “Whether it’s additional students in your schools (or) additional vehicles on your road, there is impact on your infrastructure.”

Last year’s Gulf oil spill also was a reminder of the risk that coastal states face from accidents at nearby offshore oil and gas operations, Landrieu said.

In a last-minute bid to attract support from coastal Democrats on the energy committee, Landrieu and Murkowski on Tuesday proposed dedicating the remaining 12.5 percent of revenues to a clean energy trust fund to pay for state projects.

Although the clean energy plan won yes votes from Sens. Chris Coons, D-Del., and Jeanne Shaheen, D-N.H., it was opposed by many panel Republicans and was defeated in a 12-10 vote.

Another rejected amendment offered by Sen. Rand Paul, R-Ky., would have allowed all states — not just those on the coasts — to share 37.5 percent of federal revenues from energy production on the outer continental shelf.

Landrieu’s underlying revenue-sharing plan never received a vote.

Bingaman repeatedly — and unsuccessfully — pleaded with his Senate colleagues not to allow “unrelated controversies” to bog down the drilling safety bill, which was prompted by last year’s Gulf spill.

Sen. Mark Udall, D-Colo., said the Senate was “missing an opportunity” to boost the safety of offshore drilling because of the disputes.

But Murkowski insisted that safety and offshore production go hand in hand. You can’t divorce one from the other, she said.

The stalled offshore safety measure would set new requirements for oil and gas companies operating offshore, double an existing 30-day time limit for the government to review coastal exploration plans and give the government new compensation powers for recruiting inspectors. The bill also would have formally reorganized the government agencies that oversee offshore drilling by writing into federal law an overhaul that the Obama administration launched last year.

Landrieu said she was optimistic that she and Murkowski could negotiate a compromise on revenue sharing that would get her plan through the energy committee. Although Landrieu has unsuccessfully fought to advance more limited revenue sharing proposals for years, her odds looked better than ever this time around.

“I’m encouraged,” Landrieu said, because “we experienced in this committee more support for revenue sharing than ever before.”

States already take home 100 percent of the royalties for oil and gas extracted from their waters, which typically extend three miles from high-tide lines. The jurisdictions of Florida and Texas stretch nine miles into the Gulf of Mexico. The issue is what happens with energy produced in federal territories outside states’ control.

An existing law allows four Gulf states — Alabama, Louisiana, Mississippi and Texas — to collect 37.5 percent of oil and gas royalty revenue on some leases, beginning in 2017. Other states with offshore drilling in nearby federal waters get no royalty revenue.

By contrast, inland states generally claim 50 percent of the revenue from oil and gas production on federal lands within their borders.

Landrieu’s plan would broaden the existing 37.5 percent revenue sharing program to all coastal states, including Alaska and on the East Coast, where companies now are developing offshore renewable projects. The proposal also would give states a share of all revenue tied to offshore energy leases — not just royalties — and encompass all forms of energy production.